Market Drivers for July 1, 2013
Tankan higher fueling USD/JPY gains
UK PMI beats, EU Spanish PMI above 50
Nikkei 1.28% Europe -0.16%
Oil $96.50/bbl
Gold 1241/oz.
Europe and Asia:
AUD AIG Manufacturing 49.6 vs. 43.8
JPY Tankan 4 vs. -8 prior
EUR Final Manufacturing 48.8 vs 48.7
GBP UK Manufacturing 52.5 vs. 51.3
GBP Mortgage Approvals 58K vs. 56K
North America:
USD Final Manufacturing PMI 8:30
USD ISM Manufacturing 10:00
USD Construction Spending 10:00
Better economic data from Japan and Europe helped to fuel a rally in risk FX on the first trading day of the week, taking USD/JPY through the 99.50 barrier while helping euro, Aussie and cable recoup some of the losses suffered on Friday.
In Japan the Tankan report reading came in at 4 versus 3 as sentiment amongst manufacturers improved markedly from -8 reading the period prior. The Large all Industry capex rose by 5.5% while the manufacturing outlook increased to 10 from expectations of 7. Overall the Tankan data was better than forecast and reaffirmed the view that Abenomics is starting to take hold in Japan as corporate confidence increases.
USD/JPY rose steadily through Asian and early European dealing taking out the 99.50 level and now is within striking distance of the key 100.00 mark. Today’s US ISM Manufacturing data now looms large on the horizon, and if the report surprises to the upside it could provide the fuel for an assault on the 100.00 figure as sentiment towards the pair continues to improve.
Meanwhile in Europe the data also proved to be constructive with final EU PMI Manufacturing reading rising slightly to 48.8 from 48.7 eyed. However, the most encouraging signs came from the periphery with Spanish Manufacturing PMI rising towards the key 50 boom/bust level for the first time in nearly two years while Italian PMI improved as well hitting 49.1 from 47.3 the month prior.
The news out of Europe was the first tangible proof of improving economic activity in the periphery economies and indicates that the region may be finally starting to turn towards growth as the summer progresses. EUR/USD climbed back towards the 1,3050 level on the back of the news as the pair continues to find support at the key 1.3000 figure for the time being.
Finally in UK the data also provided a lift to the longs at PMI Manufacturing rose to 52.5 from 51.3 eyed. This was the second consecutive month of expansionary readings in the UK economy which dovetails well with other economic data from the region suggesting that activity is picking up across the board. Cable rose above 1.5200 after seeing selling pressure ahead of the release, and may now try to climb through the 1.5250 offers as the day proceeds.
In North America, the focus will be squarely on the ISM Manufacturing data with markers looking for a rebound back through the 50 level as consensus calls are clustered at 50.6. A move back above 50 would be welcome news after last month’s disappointing 49.0 reading and would provide the market with a measure of confidence that US recovery remains on track. With USD/JPY now looking firmly bid ahead of the release, any positive surprise could push the pair through the 100.00 figure as the day progresses.
